STATE%OF%WISCONSIN%% BEFORE%THE%GOVERNMENT%ACCOUNTABILITY%BOARD%

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1 STATE%OF%WISCONSIN%% BEFORE%THE%GOVERNMENT%ACCOUNTABILITY%BOARD% TheComplaintof BrendanFischer, CenterforMediaandDemocracy, COMPLAINT Complainant against CoalitionforAmericanValues Respondent ThiscomplaintismadepursuanttoGAB 1.91andWis.Stat I,BrendanFischer,allegethat: AgroupcalledCoalitionforAmericanValues(CAV)registeredasa corporation for thepurposeofinfluencingelectionsbutfailedtodisclosethesourceofitsfundingas required by law, and acted like a Political Action Committee without following Wisconsin stransparencyrulesgoverningpacs. CAVincorporatedasaforTprofitcorporationinWisconsinandVirginiajustmonths beforethejune5,2012recallelection,apparentlyforthesolepurposeofspending on ads to influence that election. CAV registered as a corporation with the Government Accountability Board (GAB) on June 4 and established a segregated independent expenditure account, but listed the only donor for its $400,080 in independentexpendituresasitself. However, recent tax filings show that a VirginiaTbased 501(c)(4) nonprofit, the Center to Protect Patient Rights (CPPR) TT which was recently fined $1 million by California s elections board for evading disclosure laws in that state TT gave CAV $510,000in2012.ThisisCAV sonlyknowndonationthatyear. GiventhatWisconsin srecallelectionappearstohavebeencav sonlyactivitysince it came into existence, it is very difficult to believe that CPPR did not make this contributionforthepurposeoffundingthewisconsinrecallads,andthatcavdid notknowthatthiswasthepurposeofthecontribution. Under these circumstances, the GAB should not allow a corporation like CAV to avoiddisclosingitsdonorsbyclaimingnodonationswere madefor thepurposeof 1

2 funding independent expenditures. The facts and circumstances indicate that the corporationitselfwasformedforthepurposeofinfluencingelectionsinwisconsin, and received donations from CPPR for the purpose of making independent expenditures. IftheGABdoesnotdemandgreaterdisclosureunderthesefactsandcircumstances, itsrulesanddisclosurerequirementsinthisareawillmeannothing,andmorestate and outtoftstate groups will form corporate entities toinfluenceelectionswhile escapingmandatorydisclosurelawsintendedtoprotecttheintegrityofwisconsin elections. Coalition% for% American% Values% Was% Created% in% Advance% of% the% Wisconsin% Gubernatorial%Recall%Election,%Then%Folded% The Coalition for American Values first appeared in midtoctober2011.thegroup registered the website domain name CoalitionForAmericanValues.org on October 13,2011(seeExhibitA),incorporatedinVirginiaonOctober14,2011(seeExhibit B,) and registered as a foreign nontstock corporation in Wisconsin on October 19, See Exhibit C. On November 2, 2011, CAV registered as an independent expendituretonlypacwiththefederalelectionscommission. 2 SeeExhibitD. On November 21, 2011, the group registered a second corporationinvirginia,the Coalition for American Values Action, Inc. SeeExhibitE.OnFebruary2,2012, Coalition for American Values Action, Inc., was incorporated in Wisconsin as a foreign nontstock corporation.$ See Exhibit C. The website CoalitionforAmericanValuesAction.orgwasregisteredonthatsameday,February2. SeeExhibitF. On May 23, 2012, Coalition for American Values Action, Inc., registered as a sponsoring organization with the GAB, and sponsored the political committee Coalition for American Values Committee. See Exhibit G. It is our understanding thatthe CoalitionforAmericanValuesCommittee (hereaftercavcommittee)was firstregisteredasapaconmay23 rd,butwaschangedtoacorporationonjune4 th tocomplywithgabrule1.91.seeexhibith. CAV s GAB registration lists the address for the sponsoring organization, PAC, and corporationas6650wstatestreet,suite271milwaukee,wi,53213 adropboxat aupsstore.cav saddressinvirginiaisalsoaupsstore. 1 The registered agent for Coalition for American Values Action, Inc. is Matthew Muggerridge, a staff attorney at the anti-union National Right to Work Foundation. 2 See The Coalition for American Values PAC filings with the FEC can be accessed here: 2

3 The CAV Committee s ads first aired on or around May 24, and appeared to run through the June 5 election. The ads constituted express advocacy in support of ScottWalker. 3 SeeExhibitI. The Coalition for American Values Committee Facebook page was created on May 25, just as its ads began airing on Wisconsin television. 4 TheFacebookpagewas updated repeatedly in the runup to the recall election, and went silent after June 2012.SeeExhibitJ. 5 The corporate status of Coalition for American Values and Coalition for American ValuesActionisnolongercurrent,neitherinVirginianorWisconsin. In Virginia, CAV s status was terminated on February 28, 2013 and Coalition for American Values Action s status was terminated on March 31, 2013 for failure to paynecessaryfeesorfailuretofileanannualreport,accordingtothevirginiastate CorporationCommission.See$ExhibitsB,E. InWisconsin,the CertificateofAuthority forbothcavandcoalitionforamerican ValuesActionwasrevokedonOctober23,2013.See$ExhibitC. The corporation registered with the GAB, the CAV Committee, has kept its registration current, but has reported no expenditures since the June 2012 recall election. CAV%Spent%$400,080%in%Wisconsin%Recall%Ads%But%Didn t%disclose%true%source% Of%Funds% TheCAVCommitteereportedtotheGABthatitspentatotalof$400,080onadsin the2012recallelections,andlisteditsexclusivesourceoffundingascoalitionfor AmericanValuesAction,Inc.(thenonstockcorporationregisteredinWisconsinon February 2).See Exhibit K. The CAV Committee reported receiving two donations from the Coalition for American Values Action, Inc., $385,300 on May 24 and $14,780onMay30,andmadeexpendituresinthesameamountsandonthesame days, $385,300 on May 24 for MediaTVideos and $14,780 on May 30 for MediaT TV.Id. Because the CAV Committee registered with the GAB as a corporation with a designateddepositoryaccountforitsindependentexpenditures,underwis.admin. Code 1.91 it is only required to report contributionsmade$ forits independent expenditures. By reporting that it received all of its funding from the Coalition for AmericanValues,Inc.,CAVappearstobeclaimingitisusingfundsfromitsgeneral 3 CAV filed an oath of independent disbursements stating that they would be supporting Scott Walker. See Exhibit I. 4 Coalition for American Values Facebook page, available at 5 The only action since June 1, 2012 was the page s cover photo being changed on September 20,

4 treasury,andthatthecorporation CoalitionforAmericanValues,Inc. receivedno contributions that were made for the purpose of funding independent expenditures. Suchaclaimmightbebelievablewereittocomefromanestablishedorganization that earns or raises money for reasons other than electoral purposes, such as the NationalRifleAssociationorPeoplefortheAmericanWay(bothofwhichalsohave registered as corporations with the GAB). But it is not a credible claim when it comes from CAV, whose only apparent reason for existing was to influence Wisconsin s recall election, and which did nothing to raise money for any purpose otherthantheads(accordingtoitsownwebsite),andwhicheffectivelyfoldedafter theelection. CAV sclaimisevenmoresuspectgiventhatitsentirebudgetappearstohavecome from CPPR. It stretches the imagination to believe that CPPR provided funding to Coalition for American Values Action, Inc. for any reason other than to have those funds spent on Wisconsin s elections, since that is precisely how most if not all of thosefundswerespent. CAV%Funder%Center%to%Protect%Patient%Rights,%a% Key%Nonprofit%in%the%Koch% Brothers'%Dark%Money%Network, Fined%$1%Million%for%Campaign%Violations% CPPRgaveCoalitionforAmericanValuesAction,Inc.,$510,000in2012,according tocppr sform990filedwiththeirs.seeexhibitl. 6 ItappearsthatCAVusedthe vast majority of the funds to air independent expenditures in Wisconsin, as the grouphasdonelittleelseandnolongerexists.itdefiesreasontobelievethatcppr providedfundingtocoalitionforamericanvaluesaction,inc.,foranyreasonother thantohavethosefundsspentonwisconsin selections. CPPR isoneofthelargestpoliticalnonprofitsinthecountry,servingasaconduit fortensofmillionsofdollarsinpoliticalspending,muchofitraisedbythekochs andtheirpoliticaloperationandspentbyothernonprofitsactiveinthe2010and 2012elections, accordingtothenew$york$times. 7 TheCaliforniaFairPolitical PracticesCommission(FPPC)calledCPPRthe keynonprofitinthekochbrothers' darkmoneynetworkofnonprofitcorporations. 8 CPPR is part of what the Washington Post called a political network spearheaded by conservative billionaires Charles and David Koch, a network which raised $407 million in 6 CPPR s 2012 Form 990 excerpted as Exhibit L; complete filing available at 7 See Nicholas Confessore, Group Linked to Kochs Admits to Campaign Finance Violations, The New York Times, October 24, California Fair Political Practices Commission, Press Release, October 24, 2013, available at 4

5 2012 and distributed the funds to politically-active nonprofits across the country. 9 In2012,inresponsetoacomplaintfromtheCaliforniachapterofCommonCause, California sfppcuncoveredthatthecentertoprotectpatientrightswasinvolved in what the FPPC called campaign money laundering, where $15 million was shuffled between four different nonprofits to influence two ballot initiatives while evadingthestate sdisclosurelaws.cpprwasfined$1million,aswasanarizonat based nonprofit, Americans for Responsible Leadership. In addition, the FPPC required that the $15 million spent to secretly influence the ballot measure be turnedovertothecaliforniageneralfund. 10 CAV s%ads%impacted%election%outcome% Wisconsin voters have a strong interest in knowing who is trying to influence the outcome of elections. Those interests are even more compelling when a group is spendingenoughtohaveanapparentimpact. "Ididn'tvoteforScottWalker,butI'mdefinitelyagainstthisrecall,"onemansaysin athickwisconsinaccent,ashefishesfromapier."ididn'tvoteforscottwalkerbut I'magainsttherecall,"saysanother,leaningagainstatractor."There'sarightway, there'sawrongway,andithinkthisisthewrongway,"saysawomanidentifiedasa teacher,standinginfrontofapickuptruck,withafarminthebackground."recall isn'tthewisconsinway,"another"wisconsinvoter"says,endingwiththemessage: "Endtherecallmadness.VoteforScottWalkerJune5th." Spendingmorethan$400,000inWisconsin'srelativelysmallmediamarket,overa period of just two weeks, amounted to a neartsaturation level of advertisement. CoupledwithsimilarmessagingfromGovernorWalkerhimself,theadsappearedto help influence the outcome of the elections TT exit polls showed that a full seventy percentofvotersthoughttheuseofrecallwasinappropriate See Matea Gold, Koch-backed political coalition, designed to shield donors, raised $400 million in 2012, Washington Post, January 5, 2014, available at donors-raised-400-million-in-2012-elections/2014/01/05/9e7cfd9a-719b-11e ef e_story.html?hpid=z1 10 Reid Wilson, California to Levy Massive Fine Against Koch Brother Groups, Washington Post, Oct. 24, 2013, available at 11 Sixty percent of voters thought recalls were only appropriate for cases of official misconduct and ten percent thought recall elections should never be held. See Kevin Hetchtkopf, Early Wisconsin Recall Exit Polls: 60 Percent Say Recalls Only for Official Misconduct, CBS News, June 5, 2012, available at percent-say-recalls-are-only-for-official-misconduct/ 5

6 This was a shift from just a few months earlier. A St. Norbert College/Wisconsin Public Radio poll of Wisconsin voters from November 2011, just as the effort to collect signatures and trigger the recall elections was launched, showed that fiftyt eightpercentofthosesurveyedsupportedusingtheconstitution srightofrecallto removewalkerfromoffice,withjust38percentopposed. 12 SupportforPresident Obama sreelectioninthenovember2011pollandjune2012exitpollwereexactly thesame(51%),suggestingneitherpollwasanomalous. CAV s very expensive ads dominated Wisconsin s airwaves and appeared to have helped influence the outcome of the recall elections. But Wisconsinvotersonthe June5,2012electiondayneverknewwhowasreallybehindCAV,orthattheads, whichtutoredwisconsinresidentsabout thewisconsinway, wereactuallyfunded byasecretiveouttoftstategroupbankrolledbybillionaires. Secrecy%Is%Contrary%to%Wisconsin%Law%and%Judicial%Precedent% ThisobfuscationdemonstratedbytheCAVoperationiscontrarytotheintentionsof the Wisconsin legislature and the citizens they represent in creating campaign financelawsdesignedtoensuretheintegrityofourelections.itisalsocontraryto extensivecaselawstronglyfavoringdisclosure,anditiscontrarytothegab sown reasonsforenactingrule1.91. The Declaration of Policy in Wisconsin s campaign finance statutes, (1), Wis.Stats.,statesthat: Thelegislaturefindsanddeclaresthatourdemocraticsystemofgovernment can be maintained only if the electorate is informed.. One of the most important sources of information to the voters is available through the campaign finance reporting system. Campaign reports provide information whichaidsthepublicinfullyunderstandingthepublicpositionstakenbya candidate or political organization. When% the% true% source% of% support%or% extent% of% support% is% not% fully% disclosed...the% democratic% process% is% subjected% to% a% potential% corrupting% influence. The legislature therefore findsthatthestatehasacompellinginterestindesigningasystemforfully disclosing contributions and disbursements made on behalf of every candidate for public office, and in placing reasonable limitations on such activities. Such% a% system% must% make% readily% available% to% the% voters% complete% information% as% to% who% is% supporting% or% opposing% which% candidate% or% cause% and% to% what% extent,% whether% directly% or% indirectly. (Emphasisadded). 12 Eric Black, Poll: Wisconsin Majority Favors Recall of Gov. Walker, Minnesota Post, November 15, 2011, available at 6

7 See$ also , noting the% right% of% the% public% to% have% a% full,% complete% and% readily% understandable% accounting% of% those% activities% intended% to% influence% elections. %(Emphasisadded). The GAB promulgated Rule 1.91 pursuant to its authority to interpret and implementthesestatutes,andtoharmonizewisconsin selectionstatuteswiththe U.S. Supreme Court s decision in Citizens$ United$ v.$ FEC, which deemed that corporationscannotbebarredfromengaginginindependentexpenditures. InopeningthedoorforcorporateTsponsoredindependentexpenditures,though,the U.S.SupremeCourtspokestronglyinfavorofdisclosure,andnotedthat thefirst Amendment protects political speech, and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages. Citizens$ United$ v.$ FEC,130S.Ct.876, 916(2010). GABRule1.91providesthatcorporationsmaysponsorindependentexpendituresin Wisconsin,andisdraftedtorequiredisclosureofallcontributions made for the purposeoffundingtheindependentexpenditures. CAV received its known funding from a single source, CPPR, and appears to have donelittleelsebesidesrunadsinwisconsinelections.cavcannotreasonablyclaim that CPPR s donation was provided for any reason other than to fund CAV s independentexpenditures. Indeed,theU.S.SupremeCourthasuphelddisclosurerequirementsinresponseto secretive front groups influencing elections without disclosure. Citing past precedent, the Court in Citizens$ United notedthatithasupheldtransparency requirements to allow voters to make informed choices in the political marketplace in response to organizations running electiontrelated ads while hiding behind dubious and misleading names. Id. at 914(citing McConnell$ v.$ FEC, 540U.S.93,197(2003). CAV%Solicited%Additional%Donations%that%Were%Not%Disclosed% In addition to CAV failing to disclose its contributions from CPPR, the group also failed to report any donations it solicited from its website, where it specifically askedforfundstorunthewisconsinrecallads. As noted above, the domain name for the website CoalitionforAmericanValues.org wasregisteredonthesamedaythegroupincorporatedinwisconsin.thewebsite provides no useful information about the group s mission, affiliations, or funding, butitdoesfeaturetheantitrecall ad that aired on Wisconsin television over the words KEEPTHISTVADONTHEAIR andabuttonthatreads CONTRIBUTENOW. CLICKHERE. SeeExhibitM. 7

8 Clickingthe contributenow buttonopensapagewhereapersoncanentertheir credit card or bank information to make a contribution, along with a disclaimer stating CAV Committee is an independent expendituretonly committee and donationsarenottaxtdeductible. 13 ThedonationpagealsofeaturestheTVadover thewords KEEPTHISTVADONTHEAIR. See$ExhibitN. Any contributions made through CAV s website were made for the purpose of funding the independent expenditures, and the identity of the donors should have beendisclosedunderrule1.91.butnodonorswerereportedbesidescoalitionfor AmericanValues,Inc. CAV%Should%Be%Penalized%for%its%Non]Compliance% Despite CAV receiving contributions from CPPR and from the public that were made for the purpose of funding independent expenditures, and despite CAV apparentlyhavingbeenformedtoinfluencetherecallelection,cavdidnotdisclose thetruesourceoftheirfunding,asrequiredbygab 1.91(8)andWis.Stat WerespectfullyrequesttheGABinvestigatetheactionsofCAV,aswellasCPPR,and sanction these entities and their leaders for any and all violations it deems appropriate. CAV streasurerttwhoseaddressisalsolistedattheupsstorettisbrentdowns. DownsisalsolistedasthetreasurerforCAV sfederalpac.littleinformationis availableaboutdownsonline,butsearchingthrougharchivedversionsofwebsites showsthatheisarecentgraduateofmarquetteuniversityinmilwaukeeand chairedthemarquettechapterofstudentsforprosperity,thestudentarmofthe TeaPartygroupAmericansforProsperity,whichisfundedandchairedbyits founder,davidkoch.bothamericansforprosperityandcav sfunder,cppr,are partofthesamekochtbackedpoliticalnetwork. 14 In2008,Downswasalsothe TreasurerfortheMarquetteUniversityCollegeRepublicans. Itseemsdifficulttobelievethatarecentcollegegraduatemanagedtoestablisha politicalactioncommitteeandraiseandspendnearlyahalftmilliondollarson politicaladvertisementsinwisconsin.whatseemsmorelikelyisthathisnameis beingusedtohelpdisguisetheouttoftstatespecialinterestsseekingtoinfluence 13 Contributions to Coalition for American Values Committee are not tax deductible as charitable contributions for federal income tax purposes. Contributions from foreign nationals are prohibited. Coalition for American Values Committee is registered with the Wisconsin Government Accountability Board as an independent expenditure committee. Accordingly, we may accept unlimited contributions from individuals, corporations, and other organizations. Coalition for American Values Committee's spending is independent, and it does not make contributions to, or coordinate its spending with, any candidates or political parties. 14 See Gold, Koch-backed political coalition, designed to shield donors, raised $400 million in 2012, Washington Post, January 5, 2014, supra note 8. 8

9 Wisconsinelections,andwerequestthattheGABdeterminewhetherother individualsororganizationsareresponsibleforthecavscheme. The additionalcontact oncav swisconsingabfilingsandtheindividuallistedas CAV s GeneralCounsel onitsfederalfilingsisjamesskyles.untilmarch2011, SkyleswasDirectorofOperationsandGeneralCounselfortheFranklinCenterfor GovernmentandPublicIntegrity,whichoperatesWisconsin$Reporterand Watchdog.org. CPPR spresident,treasurer,andexecutivedirectorisseannoble,aconservative consultantwhohaslongbeentiedtothekochdonornetwork. 15 Wisconsin law states that any person, including any committee or group, who violates chapter 11 of the statutes may be required to forfeit up to $500 for each violation (1). In addition, any person, including any committee or group, who is delinquent in filing a report required by chapter 11 may be required to forfeit up to $50 or one percent of the annual salary of the office for which the candidate is being supported or opposed, whichever is greater, for each day of delinquency (2).Finally,anyperson,includinganycommitteeorgroup,who makesanycontributioninviolationofchapter11mayberequiredtoforfeittreble the amount of the contribution or portion thereof which is illegally contributed (3). We respectfully ask the Board to make public the results of this investigation in ordertohelpensuretheintegrityofwisconsin selectoralprocess. Date:January8,2014 BrendanFischer CenterforMediaandDemocracy 520UniversityAveSuite260 Madison,Wisconsin See Peter H. Stone, Sean Noble, Wizard Behind Koch Brothers Donor Network, Huffington Post, Oct. 2, 2013, available at 9

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